Business

Kuwait revalues dinar again

Kuwait allows the dinar to appreciate around 1.7 per cent against the US dollar.

25 Jul 2007 12:22 GMT

Kuwait says the reason for the revaluation was the impact of the dollar's slide on imported inflation

[AP]

"The increase was larger than the market expected, but if you look at the scale of the dollar decline over the last year or so, the previous adjustments only got Kuwait back a small part of that ground that it had lost," said Simon Williams, an economist in Dubai.

One day before, Kuwait had dropped the dinar's peg to the dollar and adopted numerous other currencies.

The central bank has said that the reason for the revaluation was the impact of the dollar's slide on imported inflation.

Regional opposition

In May, the Kuwait central bank broke ranks with five other Gulf oil producers, that have pegged their currencies to the dollar to prepare for a regional monetary union.

"This will probably increase speculation that something will happen in other Gulf countries, but it is still an unlikely event this year," said Steve Brice, regional head of research at Standard Chartered bank in Dubai.

The central banks of Saudi Arabia, Bahrain, Qatar and the United Arab Emirates have ruled out changing an exchange rate policy.

Oman has also refused to revalue its rial currency because the decline of the dollar is "a passing phase," according to the country's acting central bank governor.

"We do not intend to do anything," said Mohammed Nasser al-Jahadhmy, executive vice president at the Central Bank of Oman.